Saturday, January 31, 2009

"Amid the gloom of hiring freezes across much of academia, some New England colleges are seizing on the opportunity to scoop up the brightest newly minted PhDs to bolster their faculty ranks and gain ground on their competition."A few are recruiting tenure-track faculty in droves even as the majority of colleges, most notably Harvard, have curtailed faculty searches as part of belt-tightening measures. Northeastern is conducting a search for 46 professors in fields ranging from nanotechnology to public health. Tufts is moving forward with 52 faculty searches. Others, including Emerson, Holy Cross, and Amherst, have created teaching positions." (emphasis added:(

"Here's the pitch. Libraries would stop paying for subscriptions to journals in high-energy physics. Instead, each library or government agency would pay a set amount every year to the new nonprofit group. Each journal publisher would then apply for a portion of that money, submitting a bid spelling out how much it would cost them to review, edit, and publish their articles that year (building in some profit as well). To win a bid, the journals would commit to publishing their articles free online for anyone to see."

"Several factors make high-energy physics an ideal field for this experiment. For one thing, it is a relatively small and tight-knit research area, where almost all major papers appear in just six journals. "

There are clearly obstacles in the path of this plan. But Arxiv, the physics/math working paper archive now hosted at Cornell, seems to have had somewhat more success than the similar effort in Economics at WUSTL, pioneered by Bob Parks, so it will bear watching.

(On the subject of working papers in economics, RePEc and SSRN have filled some of that space in economics, and there are a growing number of open access journals, among them Theoretical Economics.) See also Ted Bergstrom's Journal Pricing Page for a discussion of other proposals for redesigning the market for scientific publishing.

Thursday, January 29, 2009

Joshua Gans and Scott Stern sent me a fascinating market design paper called Is there a market for ideas?, which performs some admirable intellectual arbitrage. They seek to combine modern insights on the unusual properties of intellectual property with some of the recent conclusions from market design.

In particular, they take seriously my proposal here that many market failures have to do with a failure to make the market thick, to deal with congestion, or to make it safe to participate in the marketplace, together with the fact that some transactions are regarded as repugnant.

They argue that some of the properties of ideas themselves make it difficult to organize successful markets for ideas along conventional lines: e.g. "...a key property of ideas - the potential for expropriation - limits the potential for market thickness and lack of congestion identified by Roth."

Among the particular examples they discuss of market designs that try to solve these problems and make markets for ideas are the scientific incentive system ("Open Science"), open source efforts such as Wikipedia, and commercial projects such as Ocean Tomo (which runs auctions for IP assets), and Innocentive (which runs a marketplace in which companies can post Challenges in need of solutions).

Here's the abstract:"This paper draws on recent work in market design to evaluate the conditions under which a market for ideas or technology (MfTs) will emerge and operate in an efficient way. While most research on MfT have focused primarily on bilateral exchanges, market design principles suggest that any single transaction takes place in the shadow or all other potential transactions. As highlighted by Roth (2007), effective market design must ensure four basic principles: market thickness, lack of congestion, market safety, and avoidance of “repugnance.” Taken together, these conditions ensure that participants in a market have opportunities to trade with a wide range of potential transactors (market thickness), that the market is rapid enough (relative to the speed of transactions) that market participants can feasibly turn down offers in order to seek better matches (lack of congestion), potential market participants have a high incentive to participate in the market and avoid strategic interaction which might undermine allocative efficiency and social welfare (market safety), and that market trade is not undermined by other social values which limit the ability to charge positive prices for a good (avoidance of repugnance). This paper provides a critical examination of these criteria for MfT. Our analysis suggests that microeconomic, strategic, and institutional factors likely inhibit the allocative efficiency of MfT in most circumstances. For example, Arrow’s disclosure problem suggests that the value of a given idea to any one buyer may be decreasing in the number of other potential buyers who have been able to evaluate the idea (due to information leakages in the valuation process). As a result, a key property of ideas - the potential for expropriation - limits the potential for market thickness and lack of congestion identified by Roth. At the same time, key institutional developments such as the development of formalized IP exchanges and increased attention on how to design the patent system to facilitate technology transfer suggest that effective market design may be possible for some innovation markets. Perhaps most intriguingly, our analysis suggests that markets for ideas are beset by the “repugnance” problem: from the perspective of market design, Open Science is an institution that places normative value on “free” disclosure and so undermines the ability of ideas producers to earn market-based returns for producing even very valuable “pure” knowledge. "

"...the United States Friday became the first country in the world to approve a clinical trial of embryonic stem cells in human patients.But in Canada's research community, Mr. Obama's plans have sparked anxiety that if this country fails to keep pace, it will have a tougher time recruiting smart people and convincing talent not to flock south. In short, Canada could lose its competitive edge to the Obama advantage."

Tuesday, January 27, 2009

One of the unusual things about the art market is that the "velocity" of art that becomes acknowledged as important, i.e. the rate at which it changes hands, is low. This is particularly so for art that is acquired by museums; it is often much harder for museums to sell art ("deaccession" it) than to buy it; many people think that museums should not sell art, particularly when it is acquired by donation. (Tax laws cause a lot of art to be donated to museums, as does the desire to maintain the integrity of particular collections.)

All of this is on display following the decision of Brandeis University to close its art museum and sell all of its art: Ailing Brandeis will shut museum, sell treasured art. The university needs both to cut its budget and replenish its endowment, but the decision to do it this way has aroused at least a little repugnance. Some quotes from the Globe article:

"The move shocked local arts leaders and drew harsh criticism from Rose supporters and the Association of College and University Museums and Galleries. "

"While museums regularly deaccession individual pieces, the wholesale sell-off of a collection of the Rose's stature is unprecedented. Codes of practice common among museums stress that art should not be sold to cover operating expenses."

""I'm in shock," said Mark Bessire, the recently named director of the Portland Museum Of Art. "This is definitely not the time to be selling paintings, anyway. The market is dropping. I'm just kind of sitting here sweating because I can't imagine Brandeis would take that step.""...

""This art was never given to the museum for those purposes," he said. "It should be a last resort. I can't understand how Brandeis is in such dire straits."

"There's a history of the Rose, a beautiful history in the annals of contemporary art that is not understood by the president or any of the board of trustees," said Lee. "What they’re doing is a travesty.""

"The industry’s lobbyist, George Flint, director of the Nevada Brothel Association, has been approaching the Legislature’s leadership for months about creating an entertainment tax that would require the state’s 25 legal brothels to give the state some money on a per-transaction basis. ...""Nevada is the only state where prostitution is legal, but by state law it also is restricted to counties with fewer than 400,000 residents. That outlaws it in two counties, Clark, which contains Las Vegas, and Washoe, which contains Reno. There are about 225 women licensed by the state as prostitutes; no county allows brothels to have men who sell sexual services." (emphasis added; I guess some repugnancies are stronger than others)"Still, since 1971, when prostitution was legalized, Nevada has added more than two million residents and become significantly more socially conservative. The state has also lost much of its frontier mentality, so Mr. Flint acknowledges that the tax effort is “something of an insurance policy” against the Legislature’s deciding one day to do away with the industry.“Anytime you’re going to take tax money, the state’s not going to view you as a relic of a past time and put you out of business,” explained Mr. Flint, who said he was gaining traction for a brothel tax in 2003 until he made the faux pas of joking to a reporter that he would commit to putting the governor’s portrait in every prostitute’s lair along with a note reading, “Don’t forget the governor’s share.” "

Investigators have now focused on products from a particular manufacturer:"The plant also produced peanut paste, a more concentrated product used in candy, crackers and many other kinds of foods. Tracking how the paste travels through the food supply can be challenging, because several companies can be involved in making the final food. For example, one manufacturer might coat the paste in chocolate and make a peanut butter cup, which is then sold to another company that mixes it into ice cream that may or may not also contain peanut butter. A grocery chain might buy that ice cream and sell it under a private label."

In the meantime, the Girl Scouts have issued a statement that their peanut butter cookies are safe.

It describes a sealed bid auction, required because of the speed and interdependence of markets for financial products:"a multi-stage auction was ruled out because bidders who had entered the highest bids early on might change their minds about wanting to be winners before the auction closed, and because the financial markets might themselves be influenced by the evolution of the auction, which magnifies the difficulties of bidding and invites manipulation."

That paper particularly caught my eye because, right after the Maastricht conference, I'll go to Brussels to participate in a conference on school choice. Scho0l choice is a controversial political topic right now in Belgium, about which I hope to learn more.

It came about when our attention was drawn to the unusual right of first refusal that NBC had been given by Paramount Studios when it came time to renew the broadcasting agreement for the tv show Frasier, in January 2001.

Here's the Abstract of the paper:

"Rights of first refusal are contract clauses intended to provide the holder of a license or lease with some protection when the contract ends. The simplest version gives the right holder the ability to act after potential competitors. However, another common implementation requires the right holder to accept or reject some offers before potential competitors are given the same offer, and, if the right holder rejects the initial offer, allows the right to be exercised affirmatively only if competitors are subsequently offered a better deal (e.g. a lower price).We explore, theoretically and experimentally, the impact this latter form of right of first refusal can have on the outcome of negotiation. Counterintuitively, this “right” of first refusal can be disadvantageous to its holder. This suggests that applied contract design may benefit from the same kind of attention to detail that has begun to be given to practical market design."

Incidentally, in case you think contract design falls outside the range of "market design," I agree that we haven't hit on the unconstrained optimum terminology for our new field. I tried to spark the use of the term "design economics" in a 2002 manifesto, which might have more naturally included all the things that economists can help design (e.g. marketplaces, contracts, organizations, laws, treaties...). But languages are like economies (and both are like oceans to the extent that you can't hold back the tide), so I'm cheerfully resigned to having all sorts of economic design included under the heading of market design. I guess we're just taking a very broad view of what constitutes a market...:)

Tuesday, January 20, 2009

President Obama's inaugural address touched on many themes, and spoke to many people. Here's what he had to say on market design:

"Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched, but this crisis has reminded us that without a watchful eye, the market can spin out of control -- and that a nation cannot prosper long when it favors only the prosperous. The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity; on our ability to extend opportunity to every willing heart -- not out of charity, but because it is the surest route to our common good."

Reports are that Last-Minute Tickets Are Scarce, as scalpers have relatively few tickets to sell. Many people with tickets to Obama's swearing in are apparently planning to attend.

"Senator Dianne Feinstein of California, who is chairman of the Joint Congressional Committee on Inaugural Ceremonies, has been trying to criminalize the scalping of Inaugural tickets. So far, only the Senate has passed her bill, which would make it a misdemeanor to sell or attempt to sell tickets to the swearing-in ceremony, punishable by up to $100,000 and up to a year in prison. But the bill isn’t going anywhere, unless the House suddenly decides to make it a priority in the next few hours.Some places like eBay and its subsidiaries banned the sale of Inaugural tickets. But that hasn’t stopped other private ticket agencies, which are doing a fairly brisk business in tickets for other inaugural events, but not the swearing-in ceremony."

Monday, January 19, 2009

"Giving in to the young-and-younger movement in college basketball recruiting, the NCAA has decreed that seventh-graders are now officially classified as prospects.The organization voted Thursday to change the definition of a prospect from ninth grade to seventh grade — for men's basketball only — to nip a trend in which some college coaches were working at private, elite camps and clinics for seventh- and eighth-graders. The NCAA couldn't regulate those camps because those youngsters fell below the current cutoff."

Saturday, January 17, 2009

"Can a human-milk bank pay a woman for her milk? (Milk banks provide hospitals with pasteurized human milk.) No, because doing so would violate the ethical standards of the Human Milk Banking Association of North America."

Long before breast pumps, mothers who couldn't or didn't wish to breast feed hired other lactating women as"wet nurses," but it turns out that this practice, while ancient, has also been repugnant in some times and places:"... contracts for wet nurses have been found on scrolls in Babylonia." ..."Mary Wollstonecraft, in her “Vindication of the Rights of Woman” (1792), scoffed that a mother who “neither suckles nor educates her children, scarcely deserves the name of a wife, and has no right to that of a citizen.” The following year, the French National Convention ruled that women who employed wet nurses could not apply for state aid; not long afterward, Prussia made breast-feeding a legal requirement. "

The article also comments on fashion and socioeconomic class:"By the nineteen-tens, a study of a thousand Boston women reported that ninety per cent of the poor mothers breast-fed, while only seventeen per cent of the wealthy mothers did. (Just about the opposite of the situation today.)"..." (A brief history of food: when the rich eat white bread and buy formula, the poor eat brown bread and breast-feed; then they trade places.)"

Markets allocate rights, but laws determine what those rights entail. Britain's real estate laws are unusual in giving owners only limited rights to their property when it is unoccupied. The Washington Post reports: Recession Revives Britain's Squatter Movement

"Squatting -- taking up residence in a vacant building -- has been a tradition in Britain since at least the 14th century, as well as a barometer of the times. It boomed after each of the 20th century's two world wars, when returning soldiers needed places to live, then picked up steam again in the radical 1960s.Now, despite local governments' efforts to discourage it, squatting appears to be on the rise once more as a deep recession hits the country.In Britain, trespassing is a civil offense, not a criminal one. Provided the squatters do not break a window or door to enter or otherwise damage the property, police are largely powerless to remove them.Landlords must petition a court for an eviction order, and they can be prosecuted if they attempt to remove the intruders by force. " ...

""The owners are upset and distressed about this. They can't understand how the squatters can be permitted to break into their house and live there," said Andrew Jeffrey, a lawyer who represents the owners of the Mayfair house. "In nine out of 10 countries around the globe, this would not be tolerated, and the police would remove them immediately."Nic Madge, a circuit court judge in London and a specialist in property law, said proposals in the 1970s to criminalize squatting were defeated in the face of "considerable political opposition.""The standard British sign, 'Trespassers will be prosecuted,' is generally a legal fiction," Madge said. "

"Ron Bailey, an activist who started Britain's modern squatting movement in 1968 and has written books about squatting, said Britons have a history of sympathy for the practice that goes back hundreds of years. "We look at it as a social good," he said. "If it's a house left empty for a long time, I don't think people see anything wrong with it."

Thursday, January 15, 2009

Dating and matchmaking services vary widely on a number of dimensions, one of which is price. Below I'll talk about services whose prices vary from zero to an initial fee of $20,000. One question is how much if anything does that already tell you about who might use which services?

Online Dating Putting You Off? Try a Matchmaker "Matchmakers prescreen potential matches, focusing on long-term compatibility rather than “short-term chemistry,” Ms. Clampitt said.While online sites allow unlimited fantasizing, matchmakers encourage clients to take their heads out of the clouds. “Sometimes we will get a guy who is a good-looking man, but no Brad Pitt, and he wants a thin model,” said Shoshanna Rikon, the owner of Shoshanna’s Matches, a Yenta-style matchmaking service in Manhattan that includes an in-person interview and a Web presence, and charges about $1,500 for eight dates. “We try to be more realistic with who we set him up with.""

The New Arranged Marriage"Janis Spindel Serious Matchmaking Incorporated's fees begin -- begin! -- at $20,000 for an initiation fee, plus $1,000 for a one-year membership that includes 12 dates. That also includes a background check and a home visit, during which Janis spends time with the client, to get a sense of him and verify that he is who he says he is (i.e., rich or very rich). Her image consultant also comes to inspect his wardrobe and, if necessary, make plans to revamp his look. Janis has many clients outside the New York area (in Tampa, Miami, Los Angeles, Toronto, Las Vegas). An out-of-town client must fly Janis and an assistant first class and put them up in a hotel for the home visit. Additionally, a marriage bonus is expected -- sometimes it's a car or extravagant jewelry; other times it's cash. She has received gifts in the $75,000-to-$250,000 range. "

This latter service primarily charges fees to men, and actively recruits attractive women to match them to. This reminds me of a 1993 paper by Mark Bagnoli and Ted Bergstrom called "Courtship as a Waiting Game" which considers why husbands are often older than wives. In their model, people live for two periods. In period 1, men and women are each endowed with a "quality" between 0 and 1, and a woman's quality is common knowledge at period 1, but, although men know their own quality at period 1, it only becomes common knowledge at period 2. So, in their model, the highest quality men wait until period 2, and marry the highest quality women. I guess that, in this model, the $20,000 above would be a signal of male quality... :)

Of course, the value of a match could be a subject of dispute; e.g. here's an 1885 report from the NY Times about a matchmaker suing to receive his full fee after a marriage was arranged but called off. Needless to say, matrimony need not be the only object of matchmaking; Daniel Hamermesh has a Freakonomics post describing an internet site "Ashley Madison, which matches up married women and men who wish to have a quick fling. " (I couldn't figure out their fee structure from the easy to access parts of their web page, but they do offer a $249 refund under their "Affair Guarantee Program" if you fail to have one...)

The purchase of land in the way of the runway is only a delaying action, because the government plans to require the sale of the land, by eminent domain. But Greenpeace is hoping that the legal process is congested, and can be made to run very slowly, which might delay the process long enough that it could be revisited after the next election:

"The group also plans to divide the field into thousands of tiny plots, each with a separate owner. BAA, the airport’s owner, would be forced to negotiate with each owner, lengthening the compulsory purchase process. "

"Al Sheikh's comments come at a time when Saudi human rights groups have been pushing the government to put an end to marriages involving the very young and to define a minimum age for marriage. ..."On Sunday, the government-run Human Rights Commission condemned marriages of minor girls, saying such marriages are an ''inhumane violation'' and rob children of their rights.The commission's statement followed a ruling by a court in Oneiza in central Saudi Arabia last month that dismissed a divorce petition by the mother of an eight-year-old girl whose father married her off to a man in his 50s...."Activists say the girls are given away in return for hefty dowries or as a result of long-standing custom in which a father promises his infant daughters and sons to cousins out of a belief that marriage will protect them from illicit relationships."

Tuesday, January 13, 2009

"Chegg is the Netflix of college textbooks. Get your book in the mail, along with a prepaid return address label, don’t write in it too much, and send it back once the semester is over. I took a quick look and the savings appear to be substantial for brand-new books, modest otherwise (because there are robust secondary markets for used textbooks). The newest edition of a book I assigned last semester is $127 new from Amazon, $72 for a one-semester rental from Chegg."

Some years ago, when I gave a talk on kidney exchange at the Barcelona Clinic, a nephrologist there told me there were hospitals in the US at which I might be able to buy a kidney. Now a story in Newsweek suggests that, perhaps without the hospitals taking an active part, there may be more buying and selling in the U.S. than is easily seen: Not Just Urban Legend.

Monday, January 12, 2009

Tight real estate markets make it especially difficult to complete transactions in which each party needs to sell his own house before he can buy another. Michael Ostrovsky points me to a variety of house-swap plans that resemble kidney exchange in various ways, including combinations of two-way exchanges, and larger exchanges and chains.

"Both sides of a swap transaction typically close simultaneously -- taking away the risk of being saddled with two mortgages at once, or of having to borrow more after purchasing a new home because your old house didn't sell for as much as you thought it would. When swap partners meet directly online they also save on brokers' sales commissions -- usually 4% to 7% in most markets. If there are homes of unequal value, one buyer provides the cash or gets a mortgage to make up the difference experts say.Mr. Sawtelle found his swap via a $19.95 listing on OnlineHouseTrading.com, one of at least six swap sites started in the past year. Four have started in just the past seven months, including OnlineHouseTrading.com, GoSwap.org, DaytonaHomeTrader.com and DomuSwap.com. Together the six sites have roughly 16,000 postings. At Craigslist.org, the popular ad site, the number of "home swap" listings -- which includes people trading homes temporarily for vacation -- jumped 56%, to 7,392 in the 12 months ending in December, the company says, and much of the growth came from people trying to permanently sell each other their homes."

Note that even some of the simple game theory that leads to simultaneous kidney exchanges also leads to simultaneous house exchanges, despite the fact that it's perfectly legal to write contracts about the sale of houses.

Sunday, January 11, 2009

Rebuilding social and economic order in conflict and post-conflict areas will be critical for the United States and allied governments for the foreseeable future. Little empirical research has evaluated where, when, and how improving material conditions in conflict zones enhances social and economic order. We address this lacuna, developing and testing a theory of insurgency. Following the informal literature and US military doctrine, we model insurgency as a three-way contest between rebels seeking political change through violence, a government seeking to minimize violence through some combination of service provision and hard counterinsurgency, and civilians deciding whether to share information about insurgents with government forces. We test the model using new data from the Iraq war. We combine a geo-spatial indicator of violence against Coalition and Iraqi forces (SIGACTs), reconstruction spending, and community characteristics including measures of social cohesion, sectarian status, socio-economic grievances, and natural resource endowments. Our results support the theory's predictions:counterinsurgents are most generous with government services in locations where they expect violence; improved service provision has reduced insurgent violence since the summer of 2007; and the violence-reducing effect of service provision varies predictably across communities.

Abstract: Criteria for evaluating school choice mechanisms are first, whether truth-telling is sometimes punished and second, how efficient the match is. With common knowledge preferences, Deferred Acceptance(DA) dominates the Boston mechanism by the first criterion and is ambiguously ranked by the second. Our laboratory experiments confirm this. A new ex ante perspective, where preferences are private information, introduces new efficiency costs borne by strategy-proof mechanisms, like DA. In a symmetric environment, truth-telling can be an equilibrium under Boston, and Boston can first-order stochastically dominate DA in terms of efficiency, both in theory and in the laboratory.http://papers.nber.org/papers/W14618

Friday, January 9, 2009

"Peer effects" are a potentially big issue in schools, although hard to model. How children affect each others' education can be hard to understand and measure. (What kinds of children do you want your children to go to school with, and what difference does it make?)

Wednesday, January 7, 2009

An email from the American Academy of Arts and Sciences announces some preliminary data from a new project: Humanities Resource Center Online . The section on the Career Paths of Humanities Ph.D.’s has some interesting graphs, like this one, which shows (not surprisingly) that new Humanities Ph.D.'s are much more likely to go directly into academic employment (and much less likely to go into "other employment" or postdocs) than Ph.D.'s in the sciences (broken out by physical sciences, life sciences, social sciences, and engineering).

In a difficult job market like the one this year, economists should feel (relatively) fortunate in the variety of careers open to new Ph.D.'s. The non-academic market for economists also contributes to keeping academic salaries relatively high: The Center for Business and Economic Research at the Sam Walton School of Business of the University of Arkansas posts the results of their annual survey of economics departments, for the academic years 1999-2000 through 2009-2010, including some salary information. Here is the latest one, with prospective information about 2009-10, published January 4.

Tuesday, January 6, 2009

Number 1 ranked Oklahoma will play number 2 ranked Florida Thursday evening in the Bowl Championship Series' National Championship Game, which this year will be played at the Orange Bowl. The championship game is the culmination of a sequence of "bowl" games that the BCS organizes, in which the most successful college teams each season play a final post-season game.

College football doesn't host playoffs. The "championship" game matches the two highest ranked teams at the end of the regular season, based on a more than usually uncertain ranking system (since some of the highly ranked teams will not have played each other). Sports Illustrated just published a story, before the championship game, saying that some of the early bowl games had low Nielsen ratings (which measure television viewership): Ratings are proof the addition of fifth BCS game officially a failure. The article notes"By removing the top two teams from the existing BCS bowls (Rose, Fiesta, Sugar and Orange), the remaining lineup gets unavoidably watered-down. "

Utku Unver and Guillaume Frechette and I wrote a paper which showed that (under earlier versions of the BCS system) the championship games drew enough extra television viewers to make up for the lower viewership in other bowl games that (consequently) had neither the top nor second ranked team playing in them. (See also this interview about the origin of the BCS system (to which I devoted an earlier post).)

So, while the most exciting thing for some people Thursday evening will be the final score, I'll be waiting to hear the final Nielsen ratings.

(Our European colleagues are always bemused by the large role that college plays in the life of American football players, not to mention the role that football plays in the life of American colleges. While some professional sports have minor leagues or the equivalent, colleges serve that role for football. But that's a story for another time.)

10 PM update: here's a Washington Post story on the more than usual uncertainty in this year's rankings, which may lead to a lack of consensus that the winner of the championship game is the best college team. (The president elect for one is on record as thinking that a playoff system would be more rewarding...)

One way to control admission to (some) public schools is by having an entrance exam. That solves a number of problems, including of course the time at which admissions choices are made. In response, families sometimes invest a lot of time in exam preparation. One development that has apparently moved from Asia to NYC is the "cram school". The NY Times reports on The Big Cram for Hunter High School. The story looks in on a group of sixth graders who "had paid up to $3,000 for a few months of English and math classes at Elite, a regimen modeled on the cram schools of South Korea, China and Japan.""While Elite limits advertising to Asian-language newspapers, about 50 percent of its students are non-Asian. ...Many of the students in the winter break program were children of immigrants — from South Korea, Japan, Poland — and most attend city schools. "

"When prompted, they took a moment to reflect on why they wanted to get into Hunter. Some said it was an urge to become better students and be surrounded by bright peers; others said they had been told Hunter was a vital steppingstone to elite colleges and a successful career... "

"And what if they were not among the fewer than 200 students who gain seats out of a pool of up to 2,000 test-takers?“I’ll be sad,” said James Lee, a student at Intermediate School 119 in Glendale, Queens, “but there’s still Stuyvesant.”"

Monday, January 5, 2009

Whenever I think about designing markets on which individuals can hedge big risks, I think about the remarkable market-design work of Robert Shiller. It's not his recent bestsellers that I'm thinking of as much as his 1993 Clarendon Lectures, Macro Markets: Creating Institutions for Managing Society's Largest Economic Risks. It called for the creation, among other things, of what became the Case-Shiller Home Price Indices, that allow large movements in residential real estate to be hedged.

In some cases, the unraveling of a market has caused serious inefficiencies, as when college football bowl games used to be decided before the end of the regular season (which made it harder to arrange the kind of championship games that draw high television viewership), or when gastroenterologists used to be hired long before they finished their internal medicine residencies (which caused the national market to collapse into lots of regional markets). But, in most unraveled markets, data are lacking to directly determine if a particular set of market arrangments and timing are inefficient.

Tyler Cowen at MR has a (characteristically) very interesting post on choping at Singapore food courts, where patrons reserve seats by placing tissue papers on them, and then go to stand in line to get their food. He suggests (maybe just to be contrarian) that this is efficient. As one of the comments to his post points out, this would be the case in a model in which having to look for a seat once you have your food is incomparably more costly than any other outcome. Of course it is easy to see how (with different parameters) reserving seats in advance could be inefficient (although still an equilibrium). E.g. if it takes 15 minutes to get your food, and 15 minutes to eat it, then each chair could serve four people in an hour if people looked for a chair after getting their food, but only two people per hour if people reserve a chair before getting on line.

On the one hand:"But many people reckon there is nothing rude about reserving one's spot with a packet of tissue paper. Indeed, Mr Wong, who arrived in Singapore last month, said: 'It is a practical and creative way to reserve seats instead of standing around with a tray of food turning cold.' "

On the other:"Tissue 'choping' seems to be uniquely Singaporean. Housewife Ivy Ong-Wood, in her late 30s, a Malaysian now living in Hong Kong, told LifeStyle: 'At the tea cafes or cha chan tengs in Hong Kong, people queue outside and are told where to sit. In Malaysia, there is no problem getting seats at the food centres.' "

Whatever the truth of the matter, this will not be an easy equilibrium to displace. The story notes: "It is so pervasive that companies even have tissue packs specially made with the word 'chope' for marketing purposes. "

"It is well-known that patients from Greece and Israel and the Gulf countries travel to destinations that provide priority organ transplants for those recipients.

"This practice has become termed “ transplant tourism” and the ethical objection arises from two important aspects:

"1. Rich patients with ample resources are prioritized for example in the UK (as evident by this Times of London story) to undergo transplantation which diverts resources and expertise from the native patients living in that destination country;2. The impetus to develop or expand deceased donation in the client country is diminished. Why develop a program of deceased organ transplantation, if residents of the client country can readily buy an organ in the destination country?

"Transplant tourism ( and organ trafficking) has been condemned by the Istanbul Declaration.

"The Transplantation Society is working diligently country by country to expose these practices and bring them to a halt. Alternatively, each country should develop a national self-sufficiency in organ donation and transplantation to provide a sufficient number of organs for their own native patients. "

Saturday, January 3, 2009

Much of the discussion of sales of transplantable organs focuses on whether the organ donors may receive compensation. Most countries forbid such sales as repugnant. The issue here is quite different. Britain has both private medicine and a National Health Service, and in transplants performed privately, the transplantable organ is essentially sold in a package with the surgery and hospitalization. That is, even without any payments to donors, hospitals and surgeons sell organs, and when the transplant recipients are not British nationals, questions are being raised, the paper reports:

"THE organs of 50 British National Health Service donors have been given to foreign patients who have paid about £75,000 each for private transplant operations in the past two years, freedom of information documents show.The liver transplants took place at NHS hospitals, despite severe shortages that mean many British patients die while waiting for an organ that could save their lives.The documents disclose that 40 patients from Greece and Cyprus received liver transplants in the UK paid for by their governments. Donated livers were also given to people from non-European Union countries including Libya, the United Arab Emirates, China and Israel.The surgeons who carry out the transplants receive a share of the operation fee — believed to be about £20,000 — as all the work is done privately in NHS hospitals. "

See my recent posts on the ongoing discussion in the U.S. on compensation for donors here and here. In the U.S. too, of course, although no payments to donors or their survivors are permitted, patients receive organs as part of a package that they or their insurers are charged for.

The WSJ, in its Real Time Economics Blog and in a related story in their January 2 issue, raises some questions about how discussion of financial market regulation has turned into a discussion of market design (although that's not exactly the way they put it). They recount the poor reception given to Raghuram G. Rajan's 2005 presentation at the Fed's Jackson Hole conference in honor of Alan Greenspan. Prof. Rajan noted that banks' increased exposure to the securities markets would make them less able to serve as a source of credit in a crisis, and his concerns were, the story reports, met with disdain by those assembled. The blog summarizes the attitude at the time:

"The episode suggests one reason that the crisis went unchecked: A dangerous all-or-nothing orthodoxy had come to dominate the policy debate, where one was either for free markets or against them. "

The point of the market design movement, of course, is that markets aren't either "free" or non-existent. A better description is that markets have rules, and some rules work better than others, and the goal of regulators and others who shape the rules should be to find rules that enable markets to work better.

However the WSJ blog also quotes Professor Rajan on the difficulties facing academics who wish to offer opinions on compex issues of public policy:"“Most academics are really reluctant to take part in the public dialog, because the public dialog requires you to have an opinion about things you can’t really be sure about,” says Mr. Rajan. “They fear talking about things where everything is not neatly nailed in a model. They stay away and let the charlatans occupy the high ground.” "

(The story notes that calls for sensible regulation and market design were met with condescension before the credit crisis, a condescension that is being reevaluated now. So perhaps now is the chance I've been waiting for to note that an anagram for MARKET DESIGN is NEGATED SMIRK :-)

Thursday, January 1, 2009

The Telegraph reports that "The anguish and embarrassment of arriving at an exclusive party only to find another woman wearing the same outfit could be banished forever thanks to a new website that allows partygoers to “register” their dresses before the event."

Apparently this is a serious problem, as the paper reports "The dress duplication problem has long caused anxiety among women. "

Here is the website at which you can register your dress and the event you intend to wear it to, or see if someone else has: http://dressregistry.com/ .

"Those who work in India’s arranged marriage business say that Mrs Verma is far from alone. “Interest in NRIs has fallen by a quarter in just the past few months,” said Vivek Khare, of Jeevan-saathi.com, a website that helps to arrange up to 6,000 weddings a month.Last year, an NRI with a decent career in Britain could easily arrange to meet 15 possible brides during one trip to India, according to Mr Khare. Now he would struggle to see five.The demise of the NRIs’ status owes much to India’s economic renaissance and a new sense of national pride, experts say. “The opportunities to do well in India have increased hugely,” said Vibhas Mehta, of Shaadi.com, another matrimonial website. He added that India’s present brides-to-be are more independent than their predecessors and less taken with the idea of travelling overseas, leaving their own careers and families behind. ...

"It is not only the NRIs who stand to miss out. In India, scores of private detective agencies do little else but check up on prospective brides, to ensure Indians overseas have received accurate pictures. "

Paul Milgrom has a new company, Auctionomics.Arguably already the world's leading auction theorist, and a demigod among bidding consultants, this marks Paul's entry into the world of auctioneers (and providers of auction software), with some new ideas for flexible auction formats.

The title of this post is a play on the title of my 2002 article "The Economist as Engineer:... ." The increasing involvement of economists as auctioneers (and not just auction theorists and consultants and advisors) is a sign that market design is thriving.